Reefer demand spikes as temperatures drop

FreightWaves tender volume and tender rejection indices are heavily weighted toward contracted freight volumes. The contracted freight market has far less emotion than the spot or transactional freight market, where daily rates can fluctuate without boundaries.

Much of the produce shipments that create disruptions throughout the year occur on the spot market, due to their inconsistency. The impact of these seasons is better represented in rejection rates versus tender volumes.

Carriers, especially in a market like the one currently, do not reject loads from their accounts with a contracted relationship without good reason, as they know reliability is key to building a strong relationship with their customers.

In the current environment, it is very costly to lose an existing customer. Much of the recent rhetoric of the market has been for brokers and carriers to keep volumes elevated by dropping prices while volumes are soft. A carrier who can’t cover their customers’ needs is only making this task more difficult, basically like tossing a bucket of grease on the side of a mountain you are trying to climb. So how is it volumes are increasing alongside declining capacity in what should be the offseason in a down cycle for reefer trailers?

Reefer trailers are not for just keeping items cool, but also for keeping the cargo in a steady temperature range. This range can be anywhere from -80 to 104 degrees Fahrenheit. Reefer trailers also have a layer of insulation and generally sturdier sidewall construction, making them more durable. This means reefer trailers are suitable for more than just food product transportation. Certain chemicals need to maintain a steady temperature. Given that before the trailer can haul food items again it will need to be washed thoroughly, so many carriers avoid moving both. Some shippers require that the trailers only haul food grade items to avoid cross contamination as well.

Temperatures have plummeted across the country over the past two weeks. The first round of probably many arctic blasts to hit the nation’s midsection created many record lows from the Dakotas to New England. The freight that cannot be frozen, which ranges from paint to many of the same beverages that need protection from the heat, needs to be moved through the cold. Combine that with the fact Thanksgiving is right around the corner — think turkeys and all the food — and we get a surge of reefer demand just about the time many thought the season was ending.

Compared to the dry van segment of trucking, reefer freight represents anywhere from 10-20% of the total freight volume in the U.S., meaning it is much more exposed to regional supply shortages when demand spikes. Reefer carriers do not have the blanket of coverage of their dry van counterparts. Many truckers will trade out their reefer equipment for dry van in the winter as well as they move their winter freight, further reducing the supply.  

Compared to this point last year, reefer demand is up roughly 5% after averaging -4.5% from June through October.  

About the Chart of the Week

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